Today Tom Sandborn writing for the Tyee posted a story quoting Premier Campbell’s response to health and safety issues. The story also dealt with the NDP and labour issues, but the NDP section focused on such issues as Green Bonds.

Here are some of the Premier’s comments.

On a CCPA report that called for better enforcement of worker safety regulations:

He said he had not read a recent study from the Canadian Centre for Policy Alternatives and the B.C. Building Trades Council that called for reforms to construction industry safety practices, and he expressed skepticism about the usefulness of on-site safety enforcement. “I don’t think it’s something where you say we’ve got, to be candid, a whole bunch of people coming around and throwing fines at people. I think it gets them to avoid the issue.”

Campbell did say he would read the report if it were sent to him, and expressed willingness to meet with union representatives to discuss safety issues and training.

and more:

Campbell was asked about the changes his government brought in during its first term that effectively eliminated lifetime pensions for injured workers and reduced the amount available for shorter-term WorkSafe payments by 13 per cent. Would a re-elected Liberal government at least restore the level of support for injured workers to 2001 levels?

“I won’t commit to that today,” the premier said. “I think we have a relatively fair system. Workers are now getting taken care of far more rapidly than they were before.”

A welfare rate increase, he said, was “not in the books.”

And finally, on public private partnerships:

the premier noted that the P3 (public private partnership) approach, strongly championed by his government, can slow timelines for projects. “Up front, they are slower, for sure.”

Like most of the data coming out these days, this economic report card is worse than expected. We should think about hiding it from our parents. For starters, BC’s real GDP fell by 0.3% – not a big drop, mind you, but the first actual fall in provincial GDP since 1982. Most observers now expect declining GDP for 2009, but a drop in 2008 is very much a surprise.

In the 2009 BC Budget, tabled just two months ago, economic growth for 2008 was estimated at 1.0%, slightly lower than growth of 1.3%, the average estimate of the Economic Forecast Council. This tells us yet again that our forecasting has been too biased toward good times, and we are not developing economic plans or fiscal policies with contingencies for bad times (that we hope will not materialize). The esteemed EFC did not even see a recession in 2009 as late as last Fall, and the BC government seems to have been equally delusional.

In 2008, the whole goods-producing part of the economy, i.e. the export sector, basically fall apart. That forestry got killed is probably of no surprise to anyone living in the Interior. Resource-based industries showed downward movement across the board, including a drop of 15% in forestry, agriculture and fishing. I’ve pasted Statscan’s summary below.

BC’s economy is facing a double-whammy: a demand shock as export markets to the US and Asia drop simultaneously (in 1998, it was just the Asian engine that sputtered); and a supply shock arising from the rapid drop of commodity prices, meaning it costs BC more in exports to buy the same amount of imports. On the way up, these forces, strong demand in export markets and rising commodity prices, essentially made a big part of BC’s boom overall, and almost all of it outside Vancouver, Victoria and Kelowna.

The other shoe to drop in 2009 will be the construction sector. In 2008, construction was a source of growth, up more than 4%. With the sharp drop off in new building permits and construction starts, this sector will turn negative in 2009. In employment terms, consider that there were about 235,200 employed in construction at its peak last summer. By March this number had already dropped to 187,800. This pattern will have huge ripple effects throughout the rest of the economy. It bodes ill, for example, for retail trade, which plummeted to 0.6% growth in 2008 (though still positive) from 7% the year before; more unemployment and broader consumer retrenchment will lead to a decent drop in 2009.

All of this reinforces my concerns that the economy is in worse shape than either the NDP or the Liberals are willing to admit on the campaign trail. We need to press our prospective leaders in the next two weeks on what their economic plan is, and how they are going to handle a much larger deficit than what was projected at budget time. Is either prepared to run the types of large deficits that will be needed as the economy worsens (tip: appeals to the Bank of Canada to puchase provincial debt should be made loud and vociferously, as the Bank contemplates a new round of unorthodox monetary policy measures).

This has relevance for another storyline in the GDP statistics: the growth of the public sector. BC’s GDP performance would have been deeper in the red had it not been for 3% growth in education, health care and social services, and almost 4% for public administration. In times like these, when consumer spending, business investment and export markets are down, the only major sector that can step up is government. In 2008, the BC government leaned against those headwinds – but this is in hindsight, the government thought the wind was still at its back.

In 2009, with the storm gaining strength, the lesson is that the government must do more, not less, to avert a major drop in economic output. The meme of BC “living within our means” and the excessive attention paid to keeping the deficit small (and returning to budget balance within two years) are contractionary ideas that will make the economy worse in 2009. That attitude has already settled in in Victoria to some extent, but could get worse. Making large budget cuts to “share the pain” is exactly the wrong thing to do right now, and is the type of move that turns recessions into depression.

Anyway, here is the blurb for BC from the official publication:

The effects of a sharp drop in output of the forestry industry (-18%) rippled through the economy. The decrease was triggered by a slowdown in housing construction in the U.S. combined with a high Canadian dollar in the first half of 2008. Forestry-related manufacturing, including sawmills and paper manufacturing, posted large declines. Affected by these declines, the wholesale industry contracted while transportation and warehousing services remained flat. With economic activity slowing, demand for energy was also affected. The output of utilities was down 4.0%.

Exports fell 6.8% following a small decline in the previous year. The 2008 downturn was largely due to a drop in lumber products.

Output in the mining sector was down as oil and gas extraction and metal ore mining reduced production. However, with prices high, especially for commodities such as coal and natural gas, revenues poured in. This income helped to offset the losses in the forestry sector and corporation profits registered a small gain in 2008.

After a decline in 2007, construction grew again in 2008. Business investment in non-residential structures picked up with projects related to oil and gas extraction and electricity generation. Government capital expenditure increased 0.3% after a cumulative gain of 80% over the previous six years. Housing starts fell off putting a damper on housing construction. Investment in residential construction declined 4.1%.

Growth in personal spending decelerated in 2008 to 2.8%. This was the slowest growth since 2001. Purchases of durable goods fell as sales of cars and trucks declined.

Labour market conditions stayed strong. Labour income increased 5.6%. This pace was well above the national growth rate but below the British Columbia average of the previous five years. Employment advanced 2.1% while the unemployment rate edged up to 4.6%.

The slowdown in the economy was also experienced in the service industries. Only health and public administration grew more quickly than in 2007, benefiting from government expenditures on goods and services, which advanced at a similar rate as in the previous year.

That is a loss of 22,600 jobs, of which 9,900 were full-time jobs. If we go back to March 2008, total job losses are 76,600 jobs, although a larger number of full time job losses (-85,300) is offset by some modest part time job gains (+8,600). In percentage terms that is a drop of 3.3% overall from March 2008, with 4.6% fewer full-time jobs.

Looking forward there is no end in sight for unemployment increases. According to the Canada Housing and Mortgage Corporation (CMHC), housing starts in the first quarter of 2009 were down 70% from the same period in 2008. That means most of the construction jobs that are wrapping up in the next three to nine months will send workers right to the back of the unemployment lines. And, on average, for every primary job like construction we lose another gets shed somewhere else.

I have been speaking on the economy for a series by Metro Vancouver in four locations across town. In the first installment, a month ago, I was saying that unemployment would hit 8-9% by the end of 2008. After the February stats came out, I revised that to 9-10%. And now I am feeling like those numbers could surge even beyond that. If you are interested in the fourth installment, drop by the Wosk Centre next Wednesday at noon.

Speaking of people seeking jobs, as for the election, this takes away one of the key cards the Liberals would have played: that they are better stewards of the economy. March’s unemployment rate is higher than when the Liberals first took power in 2001, and the rate will be close to, perhaps even over 8%, when April’s results are announced just before the election on May 12. They still may be able to play the economic manager through tough times role to electoral success, but that is a tougher job.

Not that I believe the government in Victoria has much influence over the economy in BC. It is external factors that drive BC’s economy; mostly export markets, Bank of Canada interest rate policies, and federal fiscal policies, all of which have been powerful tailwinds for the BC economy, largely through the channels of high commodity prices and residential construction atop spectacular real estate price increase. The Premier and the Liberals have tried to take credit for the boom. If one wants to concur with that credit, however, one must also accept that the current collapse is their fault, too.

While the big picture is beyond the province’s control, what the BC government can do is be effective in its key jurisdictional role of providing social programs. Here the government has not done a great job, given the poverty and homelessness we saw during the boom, the shredding of social assistance, the end of new social housing construction, and now, the title of having the lowest minimum wage in Canada. During a recession it is essential that the BC government maintain public spending, and if anything, we need to plan for big increases in transfers to those shut out. Expenditures will naturally rise as more people go on social assistance (the rolls are up 37% over a year agao). But we also need to make the program more responsive to the needs out there by shoring up benefit levels and reducing barriers that prevent people from getting on welfare.

Secondly, the rapidly rising unemployment needs to be countered by infrastructure spending that takes up the slack in the labour market and puts it to good use. While there are some projects that have been announced, in total employment numbers they will not make a dent in the rapid rise of the ranks of the unemployed. Now is the time to rebuild public transit, develop high-speed inter-city transit, sharply increase energy efficiency through retrofits, and invest in alternative energy. These are no-brainer, green jobs that will help transition the economy onto a sustainable growth path. The dumbest investments would be ones that move us away from sustainability, like expanding highway capacity for suburban commuters or the oil and gas industry.

So, the writ is dropping. Parties, show us your strategies for fighting an increasingly ugly recession.

A more for less approach seems to be endemic with the premier. When commenting on the federal government announcement that $50 million would be spent for housing on BC first nations reserves, Premier Campbell said “the federal money could drive the construction of ‘literally thousands of units’ in partnership with government and business” .

Now, let’s see, according to Joe Rekab construction costs for social housing have averaged $250-$260 per square foot (excluding costs for land and other charges). I guess the premier was thinking of very cheap housing. But even then the numbers do not add up.

Let’s assume that construction costs on first nations reserves would be $150 per square foot; and let’s further assume that the residents would pay $50 per square foot through their monthly rent. Further, let’s assume that the family units are small, averaging just 1,000 square feet or $100,000 in subsidized costs to build. Then the maximum number of units that could be built would be 500 ($50,000,000 / 100,000). A long way from “literally thousands of units”.

So, if the premier could not come even close to such a simple reality using conservative cost estimates, how far off could the provincial budget be from reality?

Not to worry though. Whoever wins the May election will bring down a new provincial budget. Then we will get to see how much of a ‘fudget-budget’ this really was.

Investments will be made in new and refurbished housing. We will expand supportive housing to combat homelessness and to shelter those with mental illness.

That new housing will be supported by a new integrated, personalized homelessness intervention strategy and a new community safety strategy.

Could it be that now, one year prior to hosting the Winter Olympics, the government had finally come up with a meaningful strategy to address homelessness?

I wasn’t the only one to notice. This promise made the headline of today’s article reporting on BC’s Throne Speech in the Globe: Homelessness takes centre stage in Throne Speech.

Imagine my disappointment, then, when I opened my paper copy of the 2009 Budget and Fiscal Update and found out that there was no new money to match the Throne Speech rhetoric. The only dollars attached to homelessness in particular are $30 million in 2008/09 “to acquire and renovate rental properties including 4 single room occupancy (SRO) hotels in Vancouver and 4 hotels/motels throughout British Columbia.” (p. 26).

That’s it? This amount would be woefully inadequate to meet current needs, let alone any potential increases in homelessness that may result from the economic crisis. Not to mention that these money were already announced late last year!

Instead, we are told that “Budget 2009 maintains previous funding commitments to implement new and expanded measures to help break the cycle of homelessness and support low income seniors and families.” Last I checked, previous funding commitments do not count as new investments.

To be fair, there is a line item called “Other spending” in Table 1.16 (Capital Spending) which, we are told, includes BC Housing Management Commission, Provincial Rental Housing Corporation and other service delivery agencies. It amounts to $125 million in 2008/09 and another $110 million over the next three years. Even if this all went to new social housing, and it likely does not, it would hardly solve the problem.

At the same time, the Budget doesn’t seem to include increased operating spending on housing or homelessness and the Ministry of Housing and Social Development is projected to shed 128 FTE positions in each of the next three years.

Without a funding commitment, the Throne Speech’s promise of tackling homelessness amounts to mere pre-election rhetoric. Don’t be fooled!